1. March 10, 2015 EQUITY RESEARCH James Schneider, Ph.D. 917.343.3149 james.schneider@gs.com Goldman, Sachs & Co. S.K. Prasad Borra 917.343.7293 skprasad.borra@gs.com Goldman, Sachs & Co. PART2 Redefining TheWayWe Pay in the Next Decade The Future of Finance The way we pay is changing. The plumbing connecting banks, merchants, networks and consumers is being reconsidered. From Square and Stripe to Apple and Alipay, innovators are creating new ways to transact - forcing incumbents to adapt. Witness Millennials trading personal data for convenience and retailers backing new networks like MCX to reduce fees. Analytics are helping cut interbank payment delays from days to seconds, while cryptocurrencies like Bitcoin are emerging. All the while, shifting international regulations are creating an uneven global landscape. The latest in our Future of Finance series lays out where traditional profit pools in payments are being challenged with a focus on where we are headed in the next decade. Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

3. March 10, 2015 Americas: Technology Goldman Sachs Global Investment Research 3 PM Summary: Redefining the way we pay in the next decade The level of debate around the $1.2 trillion global payments industry has never been higher. Over the past 40 years, the payments industry has evolved into a complex ecosystem comprised of financial institutions and intermediaries, technology vendors, and service providers. Banks, payment networks, merchant acquirers, money transmitters, and point-of-sale vendors all occupy unique positions in the ecosystem, and have developed their own economic models and profit pools tied to it. At the same time, multiple mega-trends technological, regulatory, demographic, and international are converging that could potentially change or disrupt todays payments ecosystem. Innovations in network technology and cryptography could change the speed and mechanics of moving money, with the UK ramping a network capable of real time (vs. a 2-3 day time lag in the US system). Millennials have different payment habits than their parents, with 60% regularly performing mobile financial transactions. Governments have enacted legislation to reduce payment transaction fees such as interchange by 50% or more in order to accelerate electronic payment adoption. And consumers around the world have very different relationships with financial institutions than their counterparts in the US, with 50% of the worlds population without access to formal financial services. We examine each of these megatrends, analyze the business models of emerging players, and look at the potential impact on the payments landscape across three channels: Business-to-Consumer, Consumer-to-Consumer, and Business-to-Business. We also analyze the various profit pools tied to each type of payment market, and whether incumbents are likely to successfully adapt, or lose market share to emerging vendors. Megatrends that are shaping the face of payments Technology We see four significant technologies impacting the future of payments: (1) Faster payment networks which combine modern network technology with risk scoring have seen adoption abroad, and could replace the US ACH network in the next 5-10 years; (2) Big data analytics which aggregate purchaser data can drive higher sales for merchants; (3) New payment security methods help safeguard consumer data; (4) Bitcoin and cryptocurrencies promise to change the mechanics of transactions. Regulation Regulation continues to play a vital role in determining the future evolution of payments, in particular: (1) Consumer protection laws determine the level of liability exposure for consumers, and can have a profound impact on the adoption of payment methods by geography; (2) Compliance requirements (particularly Anti- Money Laundering and fraud rules) have broad implications for consumer payments, particularly money transfers; (3) Interchange rules govern the fees charged by banks. Demographics Multiple demographic factors are playing a role in the payment choices people make: (1) Millennials are adopting mobile payments faster than other age groups, but also rely more on cash, while baby boomers tend to use more credit and electronic payments than other demographics; (2) Income also plays an important role in consumer payment choices, with higher-income individuals skewing toward credit and electronic payment usage, and low-income consumers using more cash. International Outside the US, multiple demographic, regulatory, and cultural factors are driving very different evolution paths for payment methods. We examine the cases of China (where online commerce is growing quickly and new services like Alipay are gaining strong traction) and Africa (where a large under-banked population is turning to mobile payments faster than the rest of the world). Why read this report? Trend #1: Technology Faster networks Big data analytics Payment security Bitcoin Trend #2: Regulation Consumer protection Compliance costs Interchange rules Trend #3: Demographic Generational Income Trend #4: International Unbanked population Credit vs. debit

5. March 10, 2015 Americas: Technology Goldman Sachs Global Investment Research 5 Our takeaways for key payment channels: B2C, C2C, and B2B B2C Payments: Networks maintain a strong position, but emerging players have a fighting chance to make inroads: Commanding $590 bn in fees globally, B2C payments is both the largest and most widely debated market in terms of potential disruption. At the heart of B2C payments are electronic payment networks including Visa, MasterCard, AmEx, and UnionPay, as well as cash and checks. Electronic payments offer clear advantages to consumers and merchants as evidenced by the rapid adoption of electronic payments over the last 15 years. But more recently, two groups of new entrants have emerged in the B2C payments market: o Innovators (such as PayPal, Square, Stripe, and Cardlytics) are working within the structure established by payment networks, providing value-added services to merchants (such as analytics, financing, and e-commerce services). o Disruptors (such as MCX, Seamless, Dwolla, Coinbase, and Bitpay) seek to disintermediate payment networks in a bid to provide merchants with lower cost electronic payments. We believe there is real demand among merchants for many